Cumis Ins. Soc., Inc. v. South-Coast Bank

• Decision Date: 29 May 1984
• Docket Number: No. S 83-326.,S 83-326.
• Citation: 587 F. Supp. 339
• Parties: CUMIS INSURANCE SOCIETY, INC., a Wisconsin corporation, Plaintiff, v. SOUTH-COAST BANK, a California banking institution; Westlands Bank, a California banking institution, and Paine, Webber, Jackson & Curtis, Inc., a Delaware corporation, Defendants.
• Court: U.S. District Court — Northern District of Indiana

587 F. Supp. 339

CUMIS INSURANCE SOCIETY, INC., a Wisconsin corporation, Plaintiff, v. SOUTH-COAST BANK, a California banking institution; Westlands Bank, a California banking institution, and Paine, Webber, Jackson & Curtis, Inc., a Delaware corporation, Defendants.

No. S 83-326.

United States District Court, N.D. Indiana, South Bend Division.

May 29, 1984.

R. Kent Rowe, South Bend, Ind., for plaintiff.

William J. Reinke, Douglas K. Dieterly, South Bend, Ind., James D. Adducci, Michael B. Roche, Chicago, Ill., John C. Hamilton, South Bend, Ind., for defendants.

MEMORANDUM AND ORDER

ALLEN SHARP, Chief Judge.

Plaintiff, Cumis Insurance Society, Inc. (Cumis), initiated this proceeding by filing a complaint in this court on July 25, 1983. This cause is before the court on motions to dismiss, for change of venue and for § 1404(a) transfer of venue of defendants, South-Coast Bank (South-Coast) and Westlands Bank (Westlands). The two California banks contend, first, that this court has no in personam jurisdiction over them in that the Indiana long arm statute does not cover their activities. Second, the banks argue that, if the court concludes that it does not have jurisdiction, venue should be changed to the Central District of California. Alternatively, assuming that the court does not grant the motion to change venue pursuant to 28 U.S.C. § 1391(a), defendants move this court to exercise its discretion under 28 U.S.C. § 1404(a) and transfer this cause to the Central District of California as the preferred place of venue. Jurisdiction of this court is predicated upon diversity of citizenship pursuant to 28 U.S.C. § 1332. For the reasons set forth below, the motions of defendants, South-Coast Bank and Westlands Bank are denied.

I.

AAA Credit Union (AAA), a federal credit union located in South Bend, Indiana, serves the employees of various companies located in Indiana. During the period July 1981 through November 1981, Larry Winsch (Winsch) was employed by AAA as an investment manager and loan officer. While acting in such a capacity, Winsch opened a money market account at defendant, Paine, Webber's South Bend branch office on or about July 3, 1981 through the use of an allegedly forged AAA corporate resolution.

On February 27, 1981, AAA purchased a $100,000 certificate of deposit (CD) with a maturity date of August 26, 1981 from South-Coast. Such purchase was made through the services of First United Fund, Ltd. (First United). First United acts as a broker between entities seeking to place their funds in high interest bearing commercial paper and financial institutions interested in receiving such funds.

Upon maturity of the CD, South-Coast mailed a maturity notice to AAA. On or about August 26, 1981, South-Coast issued a cashier's check, payable to the order of AAA, in the principal amount of $100,000. Separate checks were issued for the interest due on the CD.

In late May or early June 1981, Winsch also contacted Professional Asset Management (Professional). Like First United, Professional was in the business of brokering certificates of deposits between purchasers and financial institutions. On July 3, 1981, AAA purchased a $100,000 CD from Westlands bearing an interest rate of 19.5% with a maturity date of August 31, 1981. Upon maturity of the CD, Westlands mailed a maturity notice to AAA in Indiana. Thereafter, on or about August 31, 1981, Westlands issued a cashier's check payable to the order of AAA in the amount of $103,152.05, comprising both principal and interest due on the CD.

In early September 1981, Winsch delivered both checks to the South Bend branch of Paine, Webber for deposit in AAA's money market account opened the preceding July. Paine, Webber accepted both checks without AAA's endorsement, endorsed them and negotiated them. After the check from Westlands was returned to Paine, Webber for missing or irregular endorsement, it appears that Paine, Webber returned the check to AAA after which AAA's name was endorsed. Late in September after the check had been processed by at least two other banks (The First National Bank of Chicago and the Federal Reserve Bank of Los Angeles), Westlands paid the proceed of the check to Paine, Webber.

In November 1981, Winsch directed Paine, Webber to wire $200,000 in funds from the AAA money market account with its South Bend branch to Continental Illinois Bank to be deposited to an account "for the credit of Larry Winsch." Paine, Webber followed Winsch's direction. Thereafter, Cumis paid AAA the sum of $231,949.61 pursuant to a proof of loss involving, among other matters, Winsch's actions described above. In return, Cumis received from AAA an absolute assignment of all claims AAA might have with respect to Winsch's actions. Cumis is a Wisconsin corporation having its principal place of business in Wisconsin.

Since May or June 1982, Westlands has maintained a sales force whose purpose is to secure time deposits from financial institutions throughout 48 states. Westlands operates by sending mailers, soliciting by telephone and by advertisements in the Wall Street Journal. Westlands' sale staff began contacting business entities in Indiana in September 1982. Of the funds currently on deposit in Westlands' time deposit accounts, 0.007% is derived from Indiana sources.

In like manner, South-Coast solicits accounts in Indiana through brokers such as First United. South-Coast has used brokers exclusively for the purpose of securing time deposits from financial institutions outside the State of California.

Westlands filed its Motion to Dismiss for Lack of In Personam Jurisdiction and for Change of Venue Pursuant to Section 1391(a); 1406(a) and 1404(a) on September 16, 1983. South-Coast filed a similar motion on October 28, 1983. Memoranda in response to such motions were filed by Cumis on November 22, 1983. Both Westlands and South-Coast filed briefs in reply on December 6, 1983. On January 10, 1984, Paine, Webber filed a brief in opposition to the motions to transfer of South-Coast and Westlands. A hearing was held on both motions on April 13, 1984 in South Bend, Indiana. For the reasons set forth below, the motions to dismiss and for change of venue of the defendants, South-Coast and Westlands are denied.

II.

South-Coast and Westlands contend that they lack the minimum contacts with the State of Indiana that are necessary for this court to exercise personal jurisdiction over them under Indiana Trial Rule 4.4(A)(1) and (A)(3). South-Coast has solicited accounts in Indiana only through brokers such as First United. In its brief, South-Coast reiterates that it does not, nor has it ever (a) had any employee or representative located in Indiana on either a permanent or temporary basis; (b) had any employee or representative who traveled to Indiana for any business purpose; (c) had any agent for service of process in Indiana; (d) had any branch office, sales office, or any other business office of operation in Indiana; (e) owned any equipment or merchandise located in Indiana; (f) owned any interest in any real property located in Indiana; (g) had an affiliation i.e., parent, subsidiary, etc. with any business entity located or formed in Indiana; (h) had officers', directors', or shareholders' meetings in Indiana or (i) maintained any bank accounts in Indiana. The same statements have also been made by Westlands. On the basis of the foregoing facts, defendants maintain they are not "doing any business" in Indiana within the meaning of T.R. 4.4(A)(1).

Moreover, the banks contend that assuming arguendo they did commit a conversion of the cashier's check in California, the injury to AAA's property interest occurred in California. Thus T.R. 4.4(A)(3), which confers jurisdiction on one who caused property damage in this state by any act done outside this state is not applicable to the defendant banks in this case.

A federal court has personal jurisdiction over the parties in a diversity action only if a court in the state in which the federal court is sitting would have jurisdiction. Nelson By Carson v. Park Industries, Inc., 717 F.2d 1120, 1123 (7th Cir. 1983). Federal Rule of Civil Procedure 4(e) requires that if no federal statute provides for the manner of service, service is governed by the law of the state in which the district court sits. In Indiana, a nonresident submits to the jurisdiction of the Indiana courts if the provisions of T.R. 4.4(A) are met. T.R. 4.4(A) provides in pertinent part:

(A) Acts serving as a basis for jurisdiction. Any person or organization that is a nonresident of this state, a resident of this state who has left the state, or a person whose residence is unknown, submits to the jurisdiction of the courts of this state as to any action arising from the following acts committed by him or his agent:

(1) doing any business in this state;

* * * * * *

(3) causing personal injury or property damage in this state by an occurrence, act or omission done outside this state if he regularly does or solicits business or engages in any other persistent course of conduct, or derives substantial revenue or benefit from goods, materials, or services used, consumed, or rendered in this state;

This rule has been construed by courts in Indiana to permit a court to assume jurisdiction over nonresident defendants to the limits permitted by the due process clause. Griese-Traylor Corp. v. Lemmons, Ind. App., 424 N.E.2d 173, 179 (1981). See also W & W Farms, Inc. v. Chartered Systems, Etc., 542 F.Supp. 56, 59 (N.D.Ind.1982).

In Griese-Traylor, supra, the Court of Appeals of Indiana held that Indiana courts need not perform a two-party analysis of whether the above statute allows the exercise of jurisdiction and whether that allowance accords with due process. Rather, a court need only engage in a "single search for the outer limits of what due process permits." Griese-Traylor, supra, at 180, citing Oddi v. Mariner-Denver, Inc., 461 F.Supp....